The History of Exchanges: One Exchange to Rule Them All

Today there are a range of online cryptocurrency exchanges based all around the world. If history serves as a guide, in the future there will be just a few left, and eventually there may be one. Today the New York Stock Exchange (NYSE) rules the roost with pride of place, while the NASDAQ (founded in 1971) jockeys to be number one. NASDAQ pioneered electronic trades and reduced the spread to give investors a better deal. In 1992 it joined the London Stock Exchange. In 2007 it merged with the Nordic OMX. In 2011 the NYSE merged with Deutsche Börse, and there has been speculation that NASDAQ could merge with the NYSE. Is this good or bad? It can be argued that larger exchanges reduce cost. Given that cross border stock purchases are commonplace, it makes sense that the world community would be well served by a world exchange. On the other hand, skeptics can suggest that monopolies are not good long term. Absolute power corrupts absolutely. The US government has been keen to break up companies that have formed monopolies, but the same cannot be said for stock exchanges. Is there an assumption that the stock exchanges are so regulated by the government that there is no need to break up the monopoly of the NYSE and NASDAQ?
Cryptocurrency exchanges (CE) sprung up like mushrooms after a rain. According to some, the latter are controlled by fairies who are warmly greeted because they do not have the power to regulate and tax. CEs are subject to some government controls. They comply with their understanding of the law, but given that the subject is largely untested in court, everyone has a different opinion. The result is that every exchange has different requirements. They also have different platforms. I know from experience that there are some platforms that are so un-intuitive for me that I would rather pay higher fees rather than use a confusing website. The result is that for the US stock market, two main exchanges exist today, and there may be one in the future. For cryptocurrencies it seems likely that the market will support a number of different ones that cater for different nationalities as well as different objectives.
At one time, the financial district in San Francisco had a stock exchange. The reason is not hard to guess. The state was sitting on a mother lode of gold that was being quickly pulled out of the ground. In the period 1860-1880 there were more millionaires there than in New York or Boston. A bit later, the famous Comstock lode of silver in Nevada was in need of an outlet. San Francisco was a natural place for an exchange. SF harbor provided access to goods and news from around the world. In 1882 the SF Stock exchange was founded. In 1889 Los Angles founded an oil exchange to capitalize on their new found commodity. In 1956 the two exchanges merged, and in 1973 it - with trading floors in SF and LA - was renamed the Pacific Stock Exchange. During the 1980s it was the third largest options trading center in the country. The exchange was absorbed by the NYSE in 2006. Is that what we are seeing with cryptocurrency exchanges?
I think that the answer is no. There are a number of different online stock brokers that cater to a wide clientele. Brokers interact with the NYSE and NASDAQ, but most investors trade with the online broker and have little contact with the exchanges. Cryptocurrencies do not have a government sanctioned exchange because this is handled privately. Investors can hope that the government stays away from forming a central exchange for cryptocurrencies. It would form a monopoly that might not meet the needs of individual investors. While it would make cryptocurrencies easier to tax, can the government regulate them effectively?
History suggests that over time monopolies tend to form naturally. It is likely that in the coming decades there will be fewer exchanges. Perhaps the ones that survive will be the ones that pay most attention to the security of deposits. Online stockbrokers have now secured widespread acceptance and trust. There is hope that the same thing will happen with cryptocurrency exchanges.

Image of the Old San Francisco Stock Exchange before it was destroyed in the earthquake of 1906. The current San Francisco Pacific Exchange building is located on Pine Street at the corner of Sansome Street in the Financial District. It was built in 1930, and part still functions as an options floor.